LFP181 – Angels and Angel Investing Masterclass w/Richard Hargreaves, 50 years of Professional Unlisted Investing

Richard has an astonishing 50yrs experience in investing in young companies and helping to grow them, starting with 3i in the 1970s when they were next to the only institutional provider of development capital through to being a former chair of the BVCA and this year having released a thoroughly updated version of his book […]

Richard has an astonishing 50yrs experience in investing in young companies and helping to grow them, starting with 3i in the 1970s when they were next to the only institutional provider of development capital through to being a former chair of the BVCA and this year having released a thoroughly updated version of his book on Angeling – “Business Angel Investing – everything you need to know about investing in unquoted companies”. Listen to the end for a 25% off promo code.

Angels – private individuals – are the most important source of equity capital for fund raisings of £1-2m. New business creation would be crippled without them. In 2015 alone in the UK there were 15,000 Angel-backed companies with a combined turnover of £9bn adding £4.5bn to GDP and 70,000 jobs

Virtually every megatech has started w/Angel funding. So whether you are looking to invest in SmallCos yourself and do it more professionally for better results (Richard’s own returns over the past 15yrs have been an astonishing 5x pre-tax and 10x post-tax) or you are a Founder wishing to know more about Angels and how to attract the right ones listen up as we have a rare opportunity to listen to the key lessons from a lifetime’s learning.

One must relate factoid from Richard’s book is that a monkey picking investments at random would have outperformed TV’s Dragon’s Den which like all TV gives an increasingly false and negative view of the world. As I have mentioned before in my extensive conversations with one hundred Boarders the Capital-A Angel as I call them is more than worth their weight in Gold – praise for such is almost without limit. Equally at the opposite end there is what I call the small-a angel who having given you a few quid then just clutters up the Boardroom and proves hard to shift.

As this show is more about wisdom than information it really is best listened to – notes can only sketch the topics of conversation which include:

Richard’s background in engineering (up to and including a PhD) and how he moved from this into the civil service
how this led to moving to ICFC (3i’s as now is) in the early 70s and started his decades of early-stage investment
at that time 3i invested in 3,500 companies and had 25 offices around the UK – huge state centralism
going indie after 10yrs
NB now return of state-centralism via British Business Bank “which has similarities [to 3i]” and a slightly different model the Angel Co-Investing Scheme
3i were the dominant equity-gap supplier to earlier stage companies until the mid-80s
how VCs and Angels arrived and evolved
how the VC -> Private Equity development altered the balance
“Now the wheel has turned again and some VCs are prepared to come in early again”
one of the greatest successes from the 70s was MicroFocus (still going and now listed) where 3i put in £25k (maybe ~£1/4m today) for 20% – there being no Angels in that company
“When I think back to my career at 3i I was not used to seeing Angels – that period from mid-70s to early-80s, as you say for various reasons Angels didn’t really exist”
where the term [Business] Angel came from in the first place…
43 case studies in the book, four sections “Angel Investing”, “Investment Opportunities and Terms”,  “Managing Investments”, “The Exit”
“VC Witchcraft”
Richard’s motivations in writing this book
“An Angel is an extremely important member of society in the sense of stimulating and helping the economy to grow”
why crowdfunding is such a poor relation of Angel Investing in many ways “I think in crowdfunding you will probably get extremely bad returns”
the problem with crowdfunding and how those are avoided with Angel investing
gambling vs having a punt vs professional investing (even if just doing for yourself)
the importance of being systematic and having a methodology if you want to Do It Properly
the long term (since 1980) consistent tax advantages, never removed by any government, tax advantages for early-stage investing
lead Angels, one-shot investors, down rounds, wipeout rounds, how much you need to keep to follow-on, avoiding being ripped-off by VCs and plenty of process detail…
“One Angel is probably more dangerous [for the Company] than one VC as they don’t have an institutional approach, a set of rules you can check out”

The majority of the show then covers more precisely Richard’s methodologies, advice, lessons learned, case studies, how the market works and key takeaways… and later in the show he gives the 25% discount code for his book from the publishers website – Harriman House Business Angel Investing

And much much more

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